By Jill Desjean, Director of Policy Analysis
On Wednesday the Department of Education (ED) released proposed rules on three of the six topics negotiated in its Program Integrity and Institutional Quality rulemaking session held over the winter of 2024. Wednesday’s proposal includes changes to the regulations governing Return to Title IV Funds (R2T4), distance education, and TRIO programs. Proposed rules on cash management, accreditation, and state authorization have yet to be published.
As a reminder, we are still awaiting final rules from the Student Loan Debt Relief rulemaking session held in late 2023. Proposed rules were issued for all but one topic — waivers for financial hardship — in April and final rules are expected to be published by October of this year. Financial hardship proposed rules are expected to be issued in September.
Return to Title IV Funds
Proposed changes to the R2T4 rules included several provisions to make the R2T4 process more student-friendly. One such proposed change would permit students who received a Title IV aid credit balance refund for a federal student loan, but who never began attendance, to repay that loan disbursement under the terms of the promissory note instead of being issued a final demand letter for immediate repayment, as is currently the case.
Another proposal aims to potentially eliminate some R2T4 burden from institutions. It would do so by exempting schools with generous refund policies from having to perform the R2T4 calculation for students who withdraw. ED would consider a school’s refund policies to be “generous” if the school opts to treat the student as if they had never attended, returns all disbursed Title IV aid back to ED and refunds all institutional charges to the student for that payment period, and writes off any current year balance that results from the institution having returned the Title IV aid to ED. Importantly, adoption of this provision would be optional for institutions. In order to incentivize this practice ED would exempt schools from having to perform an R2T4 calculation if the school wished to make students whole by leaving them without a financial obligation for a payment period from which they withdrew. If a school does not adopt this provision then the institution would perform the R2T4 calculation as they currently do.
Other R2T4 changes included a new requirement for institutions to take attendance, even if they are not attendance-taking institutions, for all courses offered entirely through distance education for purposes of determining a student’s last date of attendance (LDA) for R2T4 purposes. Dissertation research courses that are part of a doctoral program would be exempt from the attendance-taking requirement. ED also proposed to codify its existing subregulatory guidance that requires institutions that are required to take attendance to document a student’s withdrawal date within 14 days of the student’s LDA.
ED argued during negotiations that institutions offering distance education courses could potentially game the system under the current rules that allow non-attendance-taking schools to use the payment period midpoint as the LDA when the student does not officially withdraw. ED also contended during negotiations that institutions should be able to determine the last date a student participated in academic activity via distance education using the functionality available in their learning management systems, because they are already required to do so in order to comply with the distance education requirement of regular and substantive interaction.
Some negotiators pushed back on this proposed requirement, arguing for an exemption to this proposal for direct assessment programs, on the basis that such programs are not linked to time but, rather, to work completed.
NASFAA is concerned about potential unintended consequences of this change to attendance-taking requirements (both related to direct assessment programs and, more broadly, to all distance education programs). We encourage schools to reach out to [email protected] and/or to submit their own comments if they are aware of negative implications of this proposal that should be brought to ED’s attention for consideration in drafting final rules on this issue.
ED attempts to address in the proposed rule concerns for students enrolled in term-based Prison Education Programs (PEP) whose studies are interrupted for reasons outside of their control to allow them to use an approved leave of absence (LOA) that would allow the student to return to their program at a different point in their PEP. Current rules require students returning from an LOA to come back where they left off in their program. Notably, ED indicated during negotiations that its intention was to create a new withdrawal exemption for students enrolled in PEPs, but it determined it lacked authority to exempt groups of students from those rules. Understanding that applying for an LOA would likely be difficult for students facing such circumstances, this alternative is better than categorizing students in such circumstances as unofficially withdrawn.
For clock-hour programs, ED proposes to simplify the R2T4 calculation by removing the option for institutions to use the so-called cumulative method, which considers the number of hours a student would have completed cumulatively across multiple payment periods in calculating the percentage of Title IV aid earned by a student who has withdrawn. Schools would be limited to the payment period option only, which only considers the scheduled hours that have elapsed during a payment period since the student began attendance in that payment period.
Finally, ED proposes a change to how the R2T4 calculation is performed for programs offered in modules, specifically with respect to establishing a “freeze date” to determine the number of days in a payment period for these programs. In place of the freeze date, which financial aid administrators at the negotiating table agreed is among the most confusing pieces of the R2T4 regulations, ED is proposing to consider a module part of the payment period for R2T4 calculator purposes only if the student began attendance in that module.
Missing from the proposed rules is another provision ED introduced during negotiations related to programs offered in modules. ED had proposed to get rid of the 49% completion withdrawal exemption on the basis that it is too complicated. Financial aid administrators argued that, although it is complex, the 49% provision benefits students and that they were willing to assume that complexity in the interest of their students. Those arguments presumably persuaded the department to keep the 49% provision in place.
Consensus was not reached on R2T4 due to concerns about attendance taking for direct assessment programs offered via distance education, but the proposed language largely matches what ED proposed with some negotiator feedback incorporated.
Distance Education
ED is proposing to create a definition for “distance education course,” as a “course in which instruction takes place exclusively as described in the definition of distance education” in CFR 600.2, consistent with the distance education course definition used in the Integrated Postsecondary Education Data System (IPEDS). It would also create a new category of additional location— virtual locations. A program would be reported as an additional virtual location whenever 100% of the program is offered through distance education.
ED proposes also to update institutional reporting requirements to add that institutions must report Title IV student aid recipients by their status as distance education students when that is the case. Enrollment categories would be: fully in-person, fully distance education, or a hybrid of the two modalities. Details on how reporting would take place would be determined by the department at a later date.
ED indicated in its issue paper shared during the first week of negotiations that one goal of the proposed changes to the distance education rules was to enable the department to better distinguish between in-person and distance education programs for purposes of evaluating student outcomes. By defining distance education and requiring schools to report distance education programs as additional locations, ED would be able to compare outcomes such as debt, earnings, and completion rates between different learning modalities. Another benefit of reporting virtual locations, per the department, would be to enable it to identify students eligible for a closed school discharge in instances where an institution closed its distance education programs but remained open for in-person instruction, or vice versa.
ED is also proposing to eliminate the ability for clock-hour programs to offer distance education via asynchronous instruction, which has been permitted since changes to the regulations were adopted in 2020. Despite some pushback from negotiators, including a recommendation to permit clock hour programs to offer no more than 50% of the program via asynchronous learning, ED held firm on its position to entirely disallow asynchronous learning for clock hour programs.
Negotiators did not reach consensus on this topic. Dissent was centered primarily on the removal of institutions’ ability to offer clock-hour programs via asynchronous instruction.
TRIO programs
Changes to the TRIO programs were negotiated by a subcommittee of the larger rulemaking session and presented as recommendations to the full committee for a consensus vote. ED had proposed to expand eligibility for three TRIO programs — the Talent Search program, the Educational Opportunity Centers program, and the Upward Bound program — to students enrolled in or seeking to enroll in a high school in the U.S., its territories, or the Freely Associated States. Current rules limit eligibility to participate in these programs to citizens and permanent residents.
The subcommittee agreed with these changes and recommended them to the full committee with only minor changes. This was the only topic where consensus was reached in this rulemaking session, so the proposed regulatory text has no substantive changes from what the committee agreed to last March.
Public comments on the proposed rules are open through August 23, 2024. NASFAA will comment and share a preview copy with members via Today’s News approximately one week before the end of the comment period. We encourage members to use the preview to inform their own comments.
After the 30-day comment period, ED will review all comments submitted, make necessary changes, and publish final rules in the Federal Register. If final rules are published by November 1, 2024, the rules would become effective July 1, 2025, with the exception of reporting distance education students, which ED proposes to implement not earlier than July 1, 2026 due to the time it will need to update Federal Student Aid (FSA) systems to accommodate this change.
Publication Date: 7/25/2024
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